In a short thread of tweets, Ethereum founder, Vitalik Buterin, proposed a possibility of the widely spoken about central bank digital coins. In the past year, a number of governments have announced plans to launch a digital currency to supplement their respective fiat currencies including the People’s Bank of China (PBoC), European Union (EU) and some talks of the Federal Reserve to look at the possibility of launching a digital dollar.

While it is widely speculated the digital currencies will not be similar to public cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH), Vitalik raised a question on the verifiability of the transactions on the CBDC’s. He tweeted,

“Important tech question about these CBDCs that are starting to pop up (CC @mg0314a): will transactions be cryptographically provable? That is, if I send you N coins, can I generate a cryptographic proof that this happened that can be verified on the ethereum chain?”

It is really simple. First of all, a transaction that is verifiable on Ethereum does not necessarily mean that the CBDC must be using the Ethereum blockchain. In fact a number of the second layer channels of Bitcoin are easily verifiable on the ETH blockchain as explained by Vitalik.

“verifiable on ethereum” != “use ethereum”.

Bitcoin transactions for example are totally verifiable on ethereum, as there are BTC light clients that can run inside the ETH chain.

A rising interest in sovereign digital currencies

The increasing interest in CBDCs threatens a total takeover of the fiat system turning it to a digitalized financial system. China’s central bank, the PBoC, has long flirted with the idea of launching a digital currency, the European Central Bank (ECB) has started talks on the potential that digital currencies hold with a number of analysts suggesting the same across a number of countries across the world.

The second largest cryptocurrency currently trades at $188.50 USD, across major crypto exchanges, representing a slight percentage drop in the past 24 hours.